Increase in state taxes being readied, but who will pay? Assembly leaders' plan would raise $450 million.

February 04, 1992|By John W. Frece and Thomas W. Waldron Laura Lippman contributed to this story.

ANNAPOLIS -- An ad hoc group of legislative leaders has decided that the state should raise $450 million in new taxes next year. But they haven't decided exactly who should pay the tab.

The delegates and senators, who have been meeting off and on for more than two months, agreed the General Assembly should raise the new taxes and cut $700 million in spending to get the state's fiscal year 1993 budget in balance.

They want to earmark $50 million of the new taxes for the state's poorest jurisdictions, Baltimore most prominent among them.

After a closed-door meeting, lawmakers said the key agreement yesterday was a decision to broaden the state's sales tax base instead of raising the 5 percent rate.

They would do that by repealing exemptions and taxing a variety of currently untaxed services.

Bringing new goods and services under the tax umbrella was more politically palatable than increasing the tax rate itself, lawmakers said.

Any agreement after many failures to reach a consensus was welcome news to Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee.

"I think we had a breakthrough," he said.

Senate President Thomas V. Mike Miller Jr., D-Prince George's, attended yesterday's meeting and, according to several of the meeting's participants, "gave his blessing" to the deal.

Mr. Miller could not be reached for comment.

Even with an agreement to raise taxes, the lawmakers still must persuade a reluctant House Speaker R. Clayton Mitchell Jr., D-Kent, to go along.

They also must persuade wary rank-and-file legislators, including increasingly vocal Republican minority that says the budget can be balanced without raising taxes at all.

Mr. Mitchell conceded yesterday that new taxes can't be avoided unless the federal government relaxes laws that require the states to offer certain social and health programs.

He said he hopes to keep any tax increase in the $200 million range.

The legislative leadership group tentatively agreed on these elements:

* Raising $100 million by closing sales tax exemptions and $150 million by applying the sales tax to new services, according to participants.

* Adding a new income tax bracket to collar an additional $94 million from Maryland's wealthiest taxpayers. No details were decided, but an earlier plan would raise the state's top income tax rate from 5 percent to 6 percent on income in excess of $100,000.

* A proposed $300 minimum tax on all corporations would bring in another $21 million. Gov. William Donald Schaefer earlier had proposed a $200 minimum corporate tax.

* Raising $37 million in new taxes on the telecommunications industry.